What are consequences to employer for not establishing health insurance plan?

Employer Health Care Arrangements

Q1.  What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.  Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms.  Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q2. Where can I get more information?

On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.
Source: IRS, http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements

What constitutes Special Enrollment?

*Special Enrollment*

Now that open enrollment has ended, you can enroll in a Covered California health insurance plan only if you experience a qualifying life event.

The next open enrollment period will be in the fall of 2014. Remember, you can enroll in Medi-Cal at any time.

Common types of qualifying life events for special enrollment:

*You get married or enter into a domestic partnership.
*You have or adopt a child, receive a child into foster care, or you place a child in adoption or in a foster home.
*You change where you permanently live, and you gain access to new Covered California health insurance plans. This includes moving to California from another state. This also applies to individuals who are released from jail or prison.
*You lose your health coverage. For example, you are no longer eligible for Medi-Cal, or you lose health coverage through your job.
*Your income changes so much that you become newly eligible or ineligible for help paying for your insurance. For example, if you are already getting help paying for your insurance premium, and your income goes down, you may be able to get extra help.
*You become a citizen, national or lawfully present individual. This event applies only to people who were not previously citizens, nationals or lawfully present.
*Your enrollment was wrong, due to the misconduct or misrepresentation of your health insurance company, Covered California or a non-Covered California entity (such as a Certified Enrollment Counselor).
*You applied for health coverage before March 31 and got a denial for Medi-Cal after March 31. If you were incorrectly denied Covered California or Medi-Cal coverage, you can also file an appeal.
*If you are a member of a federally recognized American Indian or Alaska Native tribe, you may enroll in health insurance or change your health insurance plan once a month even if the open enrollment period is over.
*Covered California can also determine, on a case-by-case basis, that you experienced an exceptional circumstance, which could allow for a special enrollment period.

After my qualifying life event, how long do I have to sign up for health insurance or change my health insurance plan in Covered California?

You have 60 days from the date on which the qualifying life event happens to enroll in a Covered California health insurance plan or change your existing Covered California plan. For example, if you have a child on June 1, you have until July 31 to notify Covered California, complete an application for your new child, choose a health plan and pay for it. If you do not get health coverage for your child, you may have to pay a tax penalty.
If 60 days pass and you do not sign up for health coverage, you will have to wait until the next open enrollment period, which will be in the fall of 2014.

Keep in mind that you can enroll in Medi-Cal at any time. You do not need a special enrollment period to enroll in Medi-Cal. To see if you or someone in your family is eligible for Medi-Cal, complete the online application at www.CoveredCA.com.

Can coverage start right away?

For most qualifying life events, the start date for coverage depends on the date you enroll, as discussed in the question above. If you enroll by the 15th day of the month, your coverage will start on the first day of the next month. If you enroll after the 15th day of the month, you coverage will start on the first day of the second month.

But there are a few exceptions to the start date rule:
•    If you lose your Medi-Cal coverage, job-based coverage or other coverage, and you use a special enrollment period, your coverage would start on the first day of the next month following your plan selection, regardless of when during the month you make your plan selection.
•    If you get married and use a special enrollment period, your coverage will start on the first day of the next month following your plan selection, regardless of when during the month you make your plan selection.
•    If you have or adopt a child or place a child in adoption or foster care, and you use a special enrollment period, your coverage starts on the date of the birth, the adoption or the placement for adoption or foster care.
•    On a case-by-case basis, Covered California may start your coverage earlier.


Did the health care reform legislation eliminate COBRA?

No. The new health care reform legislation, The Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act, did not eliminate COBRA or change the COBRA rules.

See An Employee’s Guide to Health Benefits Under COBRA, The Consolidated Omnibus Budget Reconciliation Act for more information about COBRA

Source: http://www.dol.gov/ebsa/pdf/faq-healthcarereform.pdf

How do exchanges simplify things for an employer?

Many employers are just exhausted from changing health plans every time there is another rate increase – someone always gets upset by the change and what started out as an employee benefit ends up being a challenge. Rates have escalated way too much in the past decade, some employees are reluctant to change providers and the administrative/regulatory hassles are overbearing on many employers, especially small ones. An exchange does two things to make the employer’s life simpler: First, they provide a broad choice of plans and carriers – allowing employees to choose the plan that is best for them as opposed to the traditional “one shoe fits all” approach that employers have traditionally taken when selecting a plan; Second, all of this is done on a single administrative platform that consolidates the administrative functions into a single arrangement that the employer (or the broker) can handle.


Source Blue Shield of California



Do you understand your ERISA requirements?

Many employers and health care advisors do not fully understand ERISA (Employee Retirement Income Security Act) guidelines and how ERISA impacts Group Health Plans. ERISA is a set of Department of Labor guidelines that regulate employer sponsored benefit plans. Employer sponsored ‘health & welfare’ benefits offered by most employers fall under ERISA guidelines and the failure to comply with ERISA’s requirements can mean costly governmental penalties. Health & Welfare Plan sponsors are required to provide employees with specific Plan features and provisions, funding information, and reporting to the government. Plan Sponsors face strict deadlines for disclosing Plan information to eligible employees and Plan Sponsors who provide ERISA Health & Welfare Plan benefits must follow a strict fiduciary code of conduct.


Penalties are $110 per employee per day for not providing the required employee notices.


Source: ERISA Compliance Services, Inc., www.erisacs.com

We offer health insurance only to our executives. Will we be able to continue this plan?

Under the PPACA, employers may still offer health insurance only to their executives in grandfathered plans. For new plans, a new nondiscrimination rule applies.


We currently have a 180-day waiting period before coverage becomes effective. When will that have to be changed?

Under the Patient Protection and Affordable Care Act (PPACA, a.k.a. Obamacare), beginning in 2014 employers providing group medical coverage must provide it within 90 days of hire.


What types of coverage will allow employees to satisfy the “minimum essential coverage” under the PPACA?

Individuals are required to meet the “minimum essential coverage.”  This includes having coverage under any of the following:

  • Government sponsored programs including Medicare, Medicaid, CHIP, TRICARE for Life, and veterans benefits.
  • Eligible employer sponsored plans.
  • Health plans offered in the individual market within a State.
  • Grandfathered plans.
  • Certain other health benefits risk pools.


Health benefits coverages to report on employee W-2 forms.

Employee benefits coverages that must be reported on the W-2 include all health coverages such as:

  • Medical, Dental, and Vision coverages
  • Prescription drug coverage
  • Executive physical benefits
  • On-site clinics
  • EAPs that provide medical care
  • Wellness programs that provide medical care


Is it true we will have to make changes to what we report on our employee’s W-2?

Under the PPACA, reporting on employee’s W-2 forms changes.  Employers must report the aggregate cost of employer sponsored health coverage on employee W-2 forms, code DD in box 12. This amount is not included in employee gross income.